UBS Profit Beat Overshadowed by Worries Over US Wealth Outflows
(Bloomberg) — UBS Group AG shares slid on Wednesday even after the bank posted profit that beat expectations, amid persistent signs that the wealth management business in the US is losing ground.
Client inflows at the key wealth unit slumped to $8.5 billion, far below estimates, and pre-tax profit at the unit was lower than expected. That was influenced by more than $14 billion in client outflows in the Americas, the third straight quarter of declines.
UBS has staked its strategy on growth in the world’s largest wealth market, though it remains hobbled by high costs and a distribution model reliant on semi-independent financial advisers. Pay revisions last year have contributed to the departure of about 200 advisers, taking client funds with them.
“It’s a transition-related issue,” Chief Financial Officer Todd Tuckner said on a call with analysts on Wednesday. “We do expect further net-new asset headwinds through the first half of 2026,” adding that hiring of new advisers should have an impact later in the year.
UBS shares fell as much as 5.5% on Wednesday, trading at 35.43 Swiss francs at 11:01 a.m. Analysts at JPMorgan Chase & Co. and Jefferies Financial Group Inc. flagged the outflows as a point of concern.
For the group, net income for the quarter came in at $1.2 billion. The Zurich-based bank also rolled out a $3 billion share buyback program for 2026, which could be adjusted upward depending on performance.
Switzerland’s largest bank is entering a pivotal period as it completes the integration of Credit Suisse while campaigning against a potential $26 billion increase in capital requirements and managing an approaching leadership transition. UBS is continuing its search for a successor to Chief Executive Officer Sergio Ermotti, including external candidates, ahead of his expected departure by early in 2027.
The bank’s announced buyback plans are on a par with 2025, though it said it has the “aim to do more,” subject to “further clarity around the regulatory regime in Switzerland” and ongoing capital levels. The bank plans to propose a dividend for 2025 of $1.10 per share.
The buyback plans “should not come as a surprise but the strong growth in parent bank CET1 does and bodes well for future distributions,” analysts including Thomas Hallett at KBW wrote in a note.
“We are now confident that we are going to ramp up in 2026 to $125 billion in net new assets and then in 2028 surpass $200 billion,” Ermotti said in an interview with Bloomberg Television’s Francine Lacqua, referring to the bank’s global wealth management business. He added that UBS is benefiting from clients moving their investments around amid heightened geopolitical volatility.
In regulation, UBS is seeking to soften the Swiss government’s plan to impose new rules forcing it to insulate its domestic business from any potential losses abroad.
That lobbying effort has recently gained some support among center and right-wing politicians, though a draft law being prepared by the government this year will be critical. The Swiss government expects that the bank will ultimately be forced to accept most of its demands, Bloomberg reported last month.
UBS booked $457 million in additional integration related costs after it bought back $8.5 billion of debt issued by Credit Suisse. The bank also booked a $29 million loss in its asset management unit related to the sale of its O’Connor business to Cantor Fitzgerald LP.
UBS had guided they would make a $9 million gain from the sale of its hedge fund business, announced in May. The deal originally included O’Connor’s six investment strategies with about $11 billion in assets under management. The sale has been impacted by exposure to the bankrupt auto parts supplier First Brands Group, with only two investment strategies and an alternative platform being transferred as of the end of last year.
Sergio Ermotti has said he plans to step down as CEO by the end of 2026 or early 2027. Chairman Colm Kelleher has floated the idea of Ermotti taking over from him at some point, though this would normally require a cooling-off period. Possible internal candidates to replace Ermotti as CEO include Aleksandar Ivanovic, who leads the Swiss firm’s asset management unit, wealth management co-heads Iqbal Khan and Robert Karofsky, and Chief Operating Officer Beatriz Martin.
On Wednesday, Ermotti signaled that nothing was yet fixed regarding the succession, including the point of his departure.
“When we say that I will stay at least until the early part of 2027, it doesn’t mean that I’m going to step down,” he said in the television interview. “We’re not going to let this discussion be led by external factors.”
–With assistance from Isabel Demetz, Noele Illien and Paula Doenecke.
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